BLOG 3: RBS: INSIDE THE BANK THAT RAN OUT OF MONEY

       When making the record £ 21 billion takeover deal of NatWest in 2000, no one can expect that the Royal Bank of Scotland has to face its bailout in October 2008. Ironically, it has to admit that RBS is the company that knows how to wowed the public. Indeed, just 18 months after announcing the impressive profit of £ 10.3 billion, RBS set another record by reporting the loss of £ 24 billion which is the biggest loss in the UK corporate history. Through the video, we can totally sum up the underlying causes of the failure of RBS in one word: greedy. In fact, directly associated to the collapse of the bank is the former chief executive – Sir Fred Goodwin – who had to apology the company shareholders for forcing the company to spent too much for irresponsible deals that delivered no value to the shareholders. It is unacceptable for any RBS’s shareholders to know that the catastrophic €71bn takeover of ABN Amro was done only because Sir Fred Goodwin, with his obsession with his quest to make RBS a titan of world banking, wanted to stop Barclays getting their hands on it at any cost. Ridiculously, RBS takeover deal can be described as a suicide act that was triggered by the man that had the total power in the Boardroom.

       RBS ran out of money by paying too much for the company that was overpriced without considering the later consequences. This failure can be the typical example of the bad corporate governance with poor decision making process that allows the company to make such a significant action that plainly not around the balance between risk and growth. It is difficult to ensure that the RBS collapse would have been prevented under the better corporate governance as there were plenty of other factors were at play in the near-collapse of RBS. However, at least the trust in public would not be impaired significantly knowing that the bank itself went to collapse largely because of the greedy of just one person.